US regulators have asked giant chipmaker Qualcomm to delay an annual shareholder meeting to give them more time to investigate whether a takeover bid by Broadcom, a Singapore company that is in the process of moving to San Jose, would threaten USA national security.
Before announcing its first bid for Qualcomm, Broadcom had announced that it would begin the corporate redomiciling process to the United States after having been moved from there in 2015.
Broadcom had not claimed that it was surprised by the CFIUS investigation, but that it had not known that Qualcomm's voluntary request was behind the probe. It was Qualcomm itself that issued the request for the CFIUS to review the deal. Even if the company's slate of 11 directors were to be re-elected, once Broadcom became a US company Qualcomm would have lost the CFIUS arrow in its quiver.
In addition, Qualcomm claims that the investigation is no surprise to Broadcom, which has been in communication with the USA agency "for weeks" and has made two written submissions to CFIUS itself.
Qualcomm executives pushed back in their own statement, saying Broadcom's response to the CFIUS order "is a continuation of its now familiar pattern of deliberately seeking to mislead shareholders and the general public by using rhetoric rather than substance to trivialize and ignore serious regulatory and national security issues". Also, Broadcom state its board and senior management are mostly American.
Qualcomm, one of Apple's main suppliers, is now engaged in the acquisition of the Dutch group NXP and has indicated the operation will proceed regardless of the outcome of discussions with Broadcom.
Buying Qualcomm would make Broadcom the third-largest chip maker, behind Intel Corp. and Samsung Electronics Co.
They were joined late Friday by five other members of Congress, led by Wisconsin Republican Mike Gallagher.
CFIUS was apparently split on whether or not to review Broadcom's takeover attempt.
Unfortunately for Broadcom, that last point is playing out already due to action taken by the Committee on Foreign Investment in the United States (CFIUS). However, in recent weeks, Qualcomm has become more receptive to Broadcom's proposal - that is if the company can sweeten its offer price and pass regulatory oversight.
Qualcomm still is awaiting approval from regulators in China to acquire NXP. CFIUS still has to rule on the potential acquisition, of course, but Qualcomm is probably hoping that an outcry against the takeover of state-of-the-art technology by a foreign buyer will force Broadcom to go away. On Monday, it extended its $127.50 per share tender offer until March 9.